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Jesse Kline: Carney's 'sovereign wealth fund' an admission of Liberal failures

The government has created a hostile environment for private investment

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The Carney government’s recent announcement that it will be setting up a sovereign wealth fund to “invest in strategic Canadian projects” and ensure the returns “are shared with Canadians” lifts the veil on the prime minister’s apparent belief that there’s nothing the private sector does that Ottawa can’t do better.

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In case you’ve ever wondered why you’re relying on big banks and financial advisors with decades of proven experience to manage your investments instead of the accountants in Ottawa who couldn’t balance a chequebook if their lives depended on it, we’re getting the Canada Strong Fund to invest in infrastructure, such as ports and natural resource projects.

Jesse Kline: Carney's 'sovereign wealth fund' an admission of Liberal failures Back to video

The idea to create a sovereign wealth fund isn’t all that unique. As Prime Minister Mark Carney noted, “Many countries that are blessed with natural resources, like Norway, have them.”

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Norway’s Oil Fund, which was created in 1990, takes surplus revenue generated from the oil and gas industry — largely from taxes and exploratory licenses — and squirrels it away into what has become the world’s largest sovereign wealth fund.

On the surface, it seems ironic that Carney would be pinning Canada’s economic future on an industry that his predecessor spent the better part of a decade trying to destroy. But it doesn’t appear as though the Canada Strong Fund will be financed with resource royalties (which are paid to the provinces, anyway).

Although the plan is short on specifics — Carney said consultations will be held in the coming months to iron out the details — we know the government will fund it to the tune of $25 billion over three years. The hope, according to the Finance Department, is that it “will increase over time, both from the returns that it generates, and through other assets that the government may allocate to it.”

But here’s the rub: this year’s budget predicts a $78.3-billion deficit, meaning the $8.3 billion a year Ottawa is planning to invest in the fund is all borrowed money. So when Carney says that it “will give all Canadians a direct stake in building Canada strong,” he doesn’t mean you’ll ever see any returns on your forced investment, but that your kids and grandkids might get a little help paying off the nearly $800-billion debt the Liberals have racked up since 2015.

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This contrasts sharply with Norway, where budgets are generally balanced and the country is, for all intents and purposes, debt-free. It also means that the fund’s rate of return will have to surpass the interest rate paid on the national debt — currently around three per cent — in order for it to be a net benefit to the country.

And the Canada Strong Fund appears to overlap, in many ways, with the Canada Infrastructure Bank (CIB). Carney says the two will serve different purposes and will work together, but the one thing that is certain is that they’re both incredibly expensive: the CIB is being funded with $35 billion in borrowed money over 11 years.

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If this all sounds amazing to you, Carney promises that “Canadians will be able to invest directly in the (Canada Strong) Fund if they wish.” And if you think that’s a good idea, I’ve got a parcel of Yukon tundra I think you’ll be interested in.

Even more concerning is what this says about how investors view this country. If they were actually “looking to Canada as a destination for major new investments,” as the government claims, there would be no need for taxpayer money.

The reality is that investors increasingly see Canada as too risky. An OECD study from last year found that real investment per worker — the average amount of money companies spend on capital and other investments per employee — “had been relatively robust until 2014,” but then began to fall.

In the decade between 2014 and 2024, investment per worker decreased 15 per cent in Canada, but grew by 21 per cent in the United States and 11 per cent across the OECD. This was largely attributed to decreased investment from resource extraction companies, which were hamstrung by Ottawa’s stringent environmental regulations and a new approvals process that seemed purposely designed to ensure nothing ever gets built.

Instead of trimming back the giant regulatory state that prevents projects from getting off the ground, Carney came up with a novel approach: a Major Projects Office to cut through the red tape — but only for projects that the mandarins in Ottawa deem to be in the “national interest.”

This may sound good on the surface, but it’s important to remember that investors make decisions based on the likelihood that something will generate a profit. And profits are only made when consumers believe it’s in their interest to purchase a particular good or service.

The national interest test is something entirely different: a vague bureaucratic determination that a given project will be a net benefit to the country, regardless of how much profit it can actually be expected to generate.

In a country where business decisions are made based on political considerations, rather than economic ones, it’s little wonder we don’t see investors lining up to pour billions of dollars into pipelines and other projects. And it should come as no surprise that Ottawa is creating an investment fund to put money into infrastructure that private investors don’t want to touch.

The Liberals created such an unfriendly business environment that the only way to get projects off the ground is for the government to inject them with borrowed money. The Canada Strong Fund is merely an admission of the sorry state this country finds itself in.

National Post jkline@postmedia.comTwitter.com/accessd

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